A posteriori integration of probabilities. Elementary theory [in Russian: Апостериорная интеграция вероятностей. Элементарная теория]

Kryazhimskiy AV (2015). A posteriori integration of probabilities. Elementary theory [in Russian: Апостериорная интеграция вероятностей. Элементарная теория]. Elementary Theory, Probability Theory and Applications 60 (1): 45-79. DOI:10.4213/tvp4605.

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Abstract

Increasingly, roles and responsibilities of the public sector in flood risk management are receiving attention in research and policy. Part of the debate suggests that allocating risk to the private sector increases efficiency as it promotes individual adaptation, thereby reducing the impact if a disaster occurs. In this paper, we analyse the macroeconomic effects as risk-averse investors take flood risk into account in their investment decisions. Our case study is the large Rotterdam area in the Netherlands. Using a spatial computable general equilibium model, we find that the decrease in investments in risky areas leads to a reduction in capital and production in the large Rotterdam area leading to a reduction in potential monetary disaster losses, but not to a reduction in population. The reallocation of risk reduces the long-term impacts from a flood on government tax revenues, but it also leads to welfare losses among households residing in risky regions.

Item Type: Article
Uncontrolled Keywords: flood risk; investment under risk and uncertainty; natural disasters; spatial computable general equilibrium
Research Programs: Advanced Systems Analysis (ASA)
Bibliographic Reference: Elementary Theory, Probability Theory and Applications; 60(1):45-79 [2015]
Depositing User: IIASA Import
Date Deposited: 15 Jan 2016 08:52
Last Modified: 14 Sep 2016 11:28
URI: http://pure.iiasa.ac.at/11312

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